Another Battle Won in the Napster Wars

When Napster filed for bankruptcy last week — a technical move that was part of its takeover by German media giant Bertelsmann — it was music to record executives’ ears. It meant that the threat unleashed by an 18-year-old named Shawn Fanning, who had 60 million people using his software to download free music, was finally contained. When Napster returns it will be a “legitimate” corporate site, with orderly, paying customers. That’s the plan, but containing Napster is not the same as controlling the file-swapping community. The music industry has tried everything from lawsuits to substitutes, launching sites where subscribers can download music for a fee. But for every Napster they kill, more spring up to take its place. And the labels’ own online services — like Pressplay, which charges $9.95 to let subscribers burn 10 tracks a month — have lost money and left customers cold. In fact, it’s still not clear that free sites are even bad for business. The industry blamed online piracy for last year’s 5% drop in CD sales, but didn’t mention that CD sales climbed to record levels in 2000, at the height of Napster’s reign. According to Jupiter Media, 84% of music swappers claim to spend more or the same on music now than before they started trading files. That may be disputable, but one thing’s certain — lawsuits and subscription sites haven’t worked. The relationship between consumers and music has changed, and the record industry must find ways to adapt.

EUROPEAN BUSINESS
Merging Just Got a Little Easier
Breaking up might still be hard to do, but two landmark cases by E.U. courts just made getting together in cross-border mergers easier. First the European Court of Justice radically restricted “golden shares,” which permit governments to control privatized companies by blocking decisions like takeovers. The E.U.’s second-highest court then overturned the European Commission’s 1999 decision to stop a merger between Airtours (now renamed My Travel) and First Choice, two British travel companies. The $1.2 billion deal will not be revived, but the case sets an important precedent. This is the first time a court has overturned a Commission anti-trust decision, and it comes while several larger appeals are pending — including the thwarted takeover of Honeywell by General Electric and the merger of WorldCom and Sprint. It may be too early to declare a new outbreak of merger mania, but companies with an eye on European assets will certainly be dusting off their courting clothes.

THE BOURSE
Name With Legs
Can you get too much brand recognition? Sony must think so. It sued Austrian wholesaler Time Tron for using “Walkman” to describe rival products, but Austria’s top court ruled the term was too universal to be owned by any one firm.

Please, No Equitygate
H Private equity firm Hicks, Muse, Tate & Furst is hiring former U.S. Secretary of State Henry Kissinger to help it build a European strategy. Hey, it worked for Nixon.

Aggressive Treatment
It might be time for the drug industry to pop an anti-anxiety pill. Twenty-nine U.S. states sued Bristol-Myers Squibb, alleging it blocked cheaper versions of its breast-cancer drug Taxol.

The Banking Blues
UBS Warburg will cut 10% of its London investment bankers because of the industry-wide downturn in trading. This is only the latest round of cuts to hit the financial sector, which lost about 25,000 staff last year.

INDICATORS
Breaking Windows’ Hold
Dell Computer, Oracle, and Red Hat are teaming up to sell computers running Linux, the free “open source” operating system. The announcement came just days after IBM struck a deal to provide Linux machines to the German government. Achtung, Windows.

Bringing It Back Home
China’s Finance Minister says foreign companies enjoying a 15% tax rate will pay the full domestic rate of 33% from next year. The country is trying to fill budget gaps left by cuts in import tariffs and a 23.9% rise in first-quarter state spending.

The French Concession
Breaking an 18-month impasse, France dropped its opposition to pan-European pension funds. The reforms would loosen constraints on investments, moving the E.U. closer to its goal of creating a single market for European financial services.

Rising To Stand Still
European consumer and business confidence each climbed two points to nine- and 10-month highs, according to the European Commission. But the central bank still feels the recovery isn’t robust enough to raise interest rates past 3.25%.

BOTTOM LINES
“It’s an opportunity for one great British institution to pay tribute to another.”
Steve Marinker, Heinz spokesman, on commemorative Golden Jubilee baked beans

“In our plan there are no dreams, just cost reductions. And from what I’ve seen there is a hell of a lot of room for that.”
Giancarlo Boschetti, Fiat Auto’s new CEO, on turning around the struggling company

“We had a little fight over some questions, for sure, but it was a nice fight.”
Bernd Leissner, Asia-Pacific Volkswagen president, on finding VW parts in cars made by a rival